that's more than style. that's substance. significant substance. i don't believe, and i think the vast majority of my party doesn't become and i know the governor doesn't believe that you can lead from behind. it doesn't work. it didn't really work in libya. we have seen the proof of that a few weeks ago. libya is not a safe place. the challenge of libya is not over. one lesson of libya, by the way, is that maybe our intelligence is and what we thought it was. and if it is not, how do you reach are the israelis, for example, that we will know when the iranians are close to having a bomb? so it goes tonight just to capability to credibility. again, how do you make yourself credible in the world?

if country and its more than just a matter of star trek it's a matter of substance but it's a matter of systems. it's a matter of deployment, a matter of money, a matter of capability, and it's a matter of how you lead. why don't i turn it over to michele? who, by the way, is a good friend. and one of the thing they do, give me a second, michele. i think it's very important -- >> flattering. >> you will see that this is not to make that kind of a page. i think it's very important, i don't know who watches this, but there is a consensus in our national security community about certain things. we all agree on the importance of allies. we all agree about the importance of for deployment. we may disagree about how you get a strong defense but we agree about a strong defense. there some very, very real disagreements. but i think it's very important for people around the world to understand that at the very bottom we're all americans and we're all on the same page.

take it from there. >> thank you. let me start by clarifying president obama's position on this notion of american exceptionalism. you can read it in his own strategy document. you've heard the words come out of his mouth. this president believes that the united states has a unique leadership role to play in the world. and that no other power can play that. he accepts and embraces the notion american exceptionalism is actually in some of his strategy document. but the real difference between the president's approach and a governor on these proposals is in how to play that role, how to lead in this very complex and dynamic security environment. too often when governor romney talks about american leadership, and by the way, peace through strength is a great slogan that is not a foreign policy. you know, it sounds like he's

talking about the u.s. being out front first, and the you know, the rest being alone. i think this administration came in and found a number of our alliances and partnerships afraid in the post-iraq period because of, you know, the previous years and the previous administration. and i think this president has sought to adopt an approach to american leadership that really inspires and enabled others to step up and contribute alongside us. on the theory that that collective action on the part of the international community is much more effective in dealing with the kind of threats and challenges that we face today. you can see it in the 49 nation coalition that's been built in afghanistan. you can see it with regard to how we've gone after al qaeda globally with partners on the ground. we can see it in the most

crippling sanctions regime ever put in place with regard to iran, where countries like china and russia, along with our traditional allies and a number of other states across the world have stepped up to impose the sanctions together. and you saw in the intervention in libya. we're not only our traditional european allies but our arab friends also stepped in to intervene in their own backyard. that is not leading from behind. that is leading in a way that enables others to step up, share the burdens, and be part of the solution. i think that, you know, this president has adopted a very strong and smart approach to the american leadership using all of the instruments of our national power. the military, when we must, but also much stronger on diplomacy, economic instruments and so forth. when it comes to defense and

defense spending, i think this is a big difference between the two campaigns. this president has put forward a very, you know, a defense budget that is strategic in that sense it is driven by strategy but it's also driven by the legal constraints of the law that has been put in place, the budget control act those passed by a bipartisan majority of congress that set the budget levels for the coming years. and he worked very closely hand-in-hand with the service chief, with the combatant commanders, with the chairman of the joint chiefs to come up with a strategy that met several criteria. one was at the end of they would still of the best military in the world. second was we would keep faith with the men and women who serve and with their families, given the decade of sacrifice that we have seen. and that ultimately this would underwrite our sustained

leadership in the world. now, this does support the rebounds of asia and so forth. on the pacific questions of naval forces, part of strategy is for positioning those forces we don't have to have as many to support a rotation base. if you in fact were putting forward stationed a ballistic missile defense ships in the mediterranean so you don't have to rotate them from the united states. there's going to be more ships forward deployed and forward stationed in the pacific, and what's most important is not just the number of platforms build, but the capability that is on the ships. if you look at the defense budget, it's protecting all of the capabilities that are needed in an anti-access and denial kind of environment. so the question i would have on defense spending for trendy and for governor romney, a 4%,

taking defense spending back into 4% of gdp first of all, what's the strategy behind it? there is a strategy behind. there's no military requirements behind. the military has not asked for it. and most of all, i wonder what are you going to pay for it? especially if you're not willing to increase taxes for the wealthiest americans. the arithmetic just doesn't work. attitude trillion dollars of spending over the next 10 years for defense when it's not strategically required and when we have a big deficit and debt problem to solve. >> untagged but other than that we agree on everything. >> before we get to the questions people have, answer the question about the $2 trillion figure which governor romney has talked about repeatedly. how do you pay for it because the democratic number, not a republican number. number two, actually right now we're at 4.2% gross domestic product.

you can count the overseas contingency operations. number three, if you look at the fiscal year 11 budget which was mr. gates' budget, when he was not mr. bush's secretary of defense, was mr. obama's secretary of defense, and you extrapolate that one, you come out higher than $2 trillion. so, $2 trillion was generated on the basis of certain assumptio assumptions, about the pace of defense spending in a romney administration. and the base will very much depend in part at least on the state of the economy. in other words, the sharpness of the increase. but in any event, it's kind of, if i could use the word flip-flop, by the obama administration, that actually had a higher number. if you simply extrapolate the way they would extrapolate the

romney budget. let me also point out that, while have the floor because you cut me off, we are stationed forces in asia all right additional forces. for littoral combat ships. they are small. they're not meant to fight on the open seas. we are not fighting more big ships initiative and so you want to be careful but if you want to talk about other forward deployment or other places we might stationed ships, the answer is we don't have any yet. we are talking to a whole bunch of countries, but not a single one has signed up. not a single one. and they are very reluctant to. well, if you're not going to stations of ships, then you might want to go back. we've been there and left, got kicked out actually. if you want to thank in those terms, then yes, somebody will welcome u.n. and welcome your

big ships in, then maybe you might be able just to pull it off and still have something in the indian ocean and the eastern mediterranean. and by the way, it isn't just the defense ships but if there's any kind of problems you have to send other ships there. so the numbers don't add up that way. in terms of michele's direct question, you know, how do we deal with this, after all, this is a much larger problem. don't forget, the national debt right now is $10 trillion, give or take. if the sequestered it, that's 54.6, correct me, you're the one who knows it to the nearest 10th of a bill i think it is 54.6 billion for each of nine years. 54.6 billion off of 10 trillion? think about that. how big he didn't are you making in the national debt? now why am i looking at the debt? because the budget is a fraction

of the problem. the problem is entitlement. it is not defense. defense is practically a rounding error. so if you want to go ahead and trade defense as a hostage to the issues that have to be dealt with, go right ahead. but the only people you be helping on the iranians, the north koreans, the venezuelans and others, and others like th that. >> i feel like, michele, i should -- >> by all means spent a two-minute rebuttal and then we'll go to questions. >> look, i think everyone agrees that we have to get to both taxes from and entitlements reform. so no one is taking that off the table. but when you look at defense spending come to extend the federal budget does play a role, defense spending is 20% of the overall budget, 50% of the discretionary budget. and i think the consensus actually in the pentagon leadership, especially on the military side, is that our

economic health is the foundation of our national security. and defense has to be part of the solution. you know, i think that, you know, we can further explore the issues in asia, ships in asia and so forth, but, you know, i think it's been a number of plans laid out, that only about forward stationed but rotating forces, putting through a larger percentage of 60% rotating through the region and so forth. and again, it's not just numbers of ships. it is what is the capability. it's marines, air force, it's naval ships and their associated capabilities. so again, i think it's overstating it to say that we can't research the strategy. if that were true you wouldn't have the pacific command, the navy, ahead of the navy, the head of the air force and all of

the associated military leadership standing up and sing we endorse this strategy in the budget. >> and with that, questions from the audience. and if you can, please just state your name, affiliation. [inaudible] >> you talk about credibility, substance. you have to get some kind of figured it. it's not just 2 trillion which your campaign has dismissed it relatively, what is it and what are the possible funding sources? you are a former comptroller spent as a former comptroller i can tell you that whatever number you would throw out, before you have a good sense of economic policy, it's not going to be viable. that applied not only when i was comptroller. it applied in 1981 when reagan came in. and the reason is very simple. you have to look at the rate of growth you can tolerate.

you have to look at the rate you're going to bring down the overseas contingency operations account called cocoa, and offset some of those reductions with what you're going to put into the defense budget. you have to look at as well how you're going to deal with the sequestered as a first issue, but as a second issue how frequently to the 407 going to cut that was done in the budget control act. and to throw out a number and say well, it's 1.5, 2.5 and in a way it is meaningless to what counts is the content of the program. so it's not a matter of ducking anything. it's a matter rather of saying you are the objectives we've got. for example, 15 shipped to you. as we want to get you. that's pretty specific, frankly. he's talked about a couple hundred thousand troops. that's pretty specific. he's talked about a long range bomber. that's specific to those numbers add up, if you look at okay, for

example, cannot find efficiencies? everybody talks about deficiencies over and over again. what he said, which has not been said -- i don't think anyone in recent years is i'm cutting civil service. that's an efficiency that is tough and it requires the president intervention because were not just talk about -- were talking with opm office of personnel management. i bet. >> their -- [inaudible] >> there's a a number, a program that has certain set of objectives that we're trying to reach. and again, as i said, if you simply look at the gates ogrin, that would've been already higher than $2 trillion by cannot going to get rid of all your base operating cost to the president for the sequestration of how important it is to him not to mess with military personnel costs. so you're not about to start cutting back. we have to look at, for instance, how we deal with retirement benefits. any adjustment and retirement

benefits of any significance immediately sage at 10 billion bucks a year, thanks to the accrual accounting that the actuaries who count. you've got to look at all that. so it's a nice figure for a newspaper headline, frankly, tony, but it is not a meaningful figure. what is meaningful is what you're asking for and why you're asking for it. and happy to discuss that at greater length. [inaudible] >> i think we'll very much depend on the state of economy, number one. number two, it very much depends on the kind of offset you can find within the defense budget. and i think that at the end of the day, every effort will be made to ramp up as soon as possible. but to say what it will be fiscal '14 for fiscal 15, all i can say is this going to be an effort to ramp up.

and that's going to be a pretty serious effort. >> such as to be clear that we're all being with the same fact-based, even with, under current, even with the plan that comply with the budget control act at budget control act the pacific ocean has put in place, the defense budget is still going to grow. it's just not going at quite as fast a pace as was originally planned. so in fy '13 the budget will be 525.4 billion. in fy '17 it will be at 567.3 billion. the defense budget will continue to grow. contrast back and adjusted real dollars, at the end of the bush initiative that was 479 billion, just by comparison. so this is the base budget. this is not counting ocoa. so let's put this in perspective. number two, on ships, how did we get to a place where you all

think the navy is getting to small. at the end of the clinton administration in 2001, we had 316 ships in the u.s. navy. by the end of the bush administration you had 278. so the biggest drop in the navy was actually under bush. obama has added 42 back in, with an option for an additional 15. and he has restructured several programs, including the carrier program and others to try to ensure that we get more value our taxpayer dollars and held open the possibility with that greater efficiency of actually adding shipped to the program in the future. so i think it's very important to kind of get the fact base directory the last thing i would ask is about the plans to add 100,000 additional troops, assuming you mean army our ground forces. remember why we grew the forces to what they are today. they grew to support the rotation requirements of two large simultaneous

counterinsurgency campaigns in iraq and afghanistan. we have come out of iraq. we are on a transition path in afghanistan. the current plan envisioned taking the army and the marine corps down to a size that is slightly larger than before, right before the iraq war. again, we grew the force to sustain the rotation base. what is the strategic rationale for adding 100 or i heard you say hundreds of thousands of additional ground forces postwar. and again, how do we, in an era where we have to make some tough trade-offs, what's the strategic rationale versus, say, putting that investment in really important areas like soft and isr and precision strike and cyber and all the other things that were really defined warfare of the future?

>> michael with "the boston globe." i just wasn't very am what you said about some of the numbers, responsive to the obama representative, talking to high you get 4% of gdp. you said if you have an account is 4.2% so if by your logic are saying romney will then reduce defense spending to 4%? if given an apples to apples comparison so everyone can understand. >> sure. here's the point. the overseas contingency operations account is essentially driven by afghanistan and iraq but iraq is going. and afghanistan is being drawn down. and mr. romney has said as long as the commanders on the ground our code for with the 2014 deadline and we can discuss the differences there've because it's not just a minor new ones, then he's prepared to follow their advice. in which case that account, because driven by operations comes down.

the point though is that you will still be taking some of that money, there are billions of dollars in that account that really have a long-term implication and they are not purely driven by the afghanistan operation. so you would move that to the basement and yes, you would in theory come down from 4.2% to 4%. there's no question about it. by the way, let me point out a couple of things. it's absolutely correct that the number of ships has gone up in the last few years. do you know i? because i find them. it takes a bunch of years to build ships. and every year that i was comptroller we bought more ships than the previous year. that's what the numbers have gone up. look at the trend, the future trend of these chips, options on ships or you believe that is a bridge in brooklyn i can sell you, there's two theories i can in addition to. options don't mean a thing. but in practice that's what the number of ships has gone up.

and as of soft and i s. r., which is intelligence, surveillance and reconnaissance, for those who don't speak like we do, those are relatively low cost relative to the larger number of programs that were not talking about 20% of the defense budget or anything like that in these things. things. software is the relative the special operations forces and it's a relatively small percentage of the budget. so you want to be clear about stuff, i'm all for being clear about stuff. >> you also mentioned, craig you talk about defense budget and how it describing 60% of discretion spending as a rounding error. not to think it is a go hand in hand. >> that's the problem. our problem is not a deficit from. it is an overall national debt problem. that's why we have a fiscal crisis. because we have a $10 trillion

debt from and they'll have to raise the debt ceiling or least they would be dated in about four weeks or so. if you want to get that debt down, if you want to get down from $10 trillion, which is roughly i think right now about 64% of gdp, correct me if i'm off by a couple of% back, you want to bring that down. getting rid of $55 billion a year is not going to do it. because just the interest, even at qe2, quantitative easing, is going to beat up that 55 billion. so i look at the prom, i look at the actual national problem. sure, if you define your problem in the narrowest possible terms, usually that medicare, italy the sources you can leave out the indictment can use conducive right, my prom is a budget problem. venture, close to 5 50 percent. i don't deny that.

>> [inaudible] >> there's a question about i think vice president biden was saying that governor romney is advocating $2 trillion increase. and ryan said that's not what we're asking for. we are seeking to roll back a trillion dollars of cuts. what is in that $1 trillion of cuts? what is included? >> for the best of my knowledge, if you at $487 billion of the budget control act cut to the $492 billion that right now we're facing on the fiscal cliff, with sequestration, that nobody wants but that the president has already said he will veto if it's not exactly pashtun is this an effort, think about this but it is an effort to exempt defense, the president is prepared to veto congressional action and let us all go over the fiscal cliff, which frankly, is not my idea of

how to do with the problem but that's the president thank you. let's say that happen. let's say congress says we really cannot jeopardize our national defense but the president says fine, i'd be do the he didn't veto the budget control act buddies ready to be do this. 492 billion plus 487 billion is awfully close to a trillion dollars. >> if i could just clarify the veto threat. go ahead. >> he didn't seem, he came cannot defend the 4% gdp figure in the. he said we are not looking at adding more fun if it were only looking at rollback is about. >> well, i mean, if you roll back cuts in your adding money by definition. and 4% of gdp, as you heard from michele is not the administration's position. so by definition we're adding money. it is to their adding money. i don't know what it is in constant dollars. in some years it actually means no real growth.

once you take out the inflation as you look at what's really going on. and particularly by the way, inflation and defense accounts, particularly procurement is much higher than, say, the consumer price index. but let's leave that technicality aside. they are growing, we are saying we're going to grow more sharply. >> final point on that. if this trillion dollars by rolling back, all this means, if that doesn't add up to 4% of gdp to is that all they're talking about? >> well again, i think 4% of gdp is exactly that. when he said he's going to rollback, that's where you start the that doesn't mean that's where you finish. >> let's move on. >> if i could just, as i understand it the president's veto threat is actually, look, if congress sends him a deal, a budget deal that does not include revenues, even, you know, some additional tax burden

for the top one to 2% of the wealthiest individuals in this country, that if they do not, if the deal does not include that he will veto. and the administration has objected to excluding defense as a whole category from, you know, the deliberations on the budget where things should go. and again, rightly so, given that if the budget is part of the solution, it's a huge part of the budget. >> more questions? >> i've heard a lot about numbers tonight on weapons systems. but throughout this campaign i haven't heard almost anything about soldier family stress, suicides, the high number of wounded. there are 1500 families and

soldiers in rehab. interviewing these guys for years and years. the stress that they are under enormous because the two wars we've been fighting come using the same small groups. why aren't we hearing more from both candidates about the stress that these wars have put on our troops and their families, and why are we hearing more about options for relieving stress to? >> if i could circuit personal, i think this set of issues is at the forefront of the president's mind, secretary panetta's mind on a daily basis but if you look at their actions, the accounts that were perhaps most protected in the latest budget were investments in wounded warrior care, investment in ptsd. secretary of defense panetta recently announced a new suicide prevention initiative to really

try to get to the bottom of this, because what's happening is it's incredibly disturbing. it's tragic. it can't go on, and he's really going after 20 figure out how to deal with it. and if you look on the va site, the va has gotten the largest budgetary increases under this administration in its history. it's protected. the president has been clear that veterans and active duty service members will not be, will be -- will not be touched if sequestration is going to affect. so, you know, i think there's statements but also importantly actions by this administration to ensure that we are trying to do our best to take care of our servicemembers and their families and vets. so the concern is there and the action is there. >> you asked why it hasn't. the reason is because both sides agree about this.

there's nothing to argue about. anybody who has visited walter reed or bethesda can't argue about this. i'm going into walter reed, and i'm sure you've done this, and i met this young, most of in about 22, young african-american woman, to get back on, grandma was looking after them, and she lost both her legs up to the top of her thighs. that's enough to make you cry. so, you know, and by the way, 99% of the folks in hospital want to get back in the field with their buddies. it's amazing morale. so i think the reason there isn't a debate is because there's a consensus. [inaudible] >> i guess the question that i'm going to is, we're hearing a lot about how we need new bombers to where's the talk about needing a psychiatrist or more of them? god knows the army does. >> well, i think again, i can't speak for michele, but it seems

to me that if this is your number one priority, and if you are indeed protecting the military personnel accounts, then the money is going to go into these things. programs are being started. there are somethings the obama administration start. wounded warriors target under mr. bush. if you look at these programs, hand off from us in the bush administration to these folks in the obama administration was smooth but and if mr. romney wins, i guarantee you the hand of will be smooth the other way. nobody wants to do anything to make life more difficult for those who already are suffering so badly. >> i do think there is a difference, one different year, and it's certain not on the level of the compassion we all feel and the concern we all feel. but on health care system of the va. one of the proposals that have been following table similar to how governor romney would approach with medicare is the

talk of using, changing the va system to go to a system of vouchers. i think that the va system, if you actually look at it, is probably the most respected, hospital system nationwide. i mean, they get very high marks for quality of patient care and so forth. i mean, i think the idea of messing with that system and going to an unproven voucher system is very worrisome for a lot of vets that i talk too. and i do think that's a policy difference on investment in the va that is different between the two campaigns. >> dov, secretary lehman, former navy secretary in an interview recently played out the naval plan, 15 ships a year, very

ambitious program. basically, not quite doubling the navy's current shipbuilding plan, which is 13 to $14 billion a year, which was under the bush administration, obama administration. where are you going -- were i going to get this money to build all those additional ships? and, where are you going to get the sailors quote your increase in utah by increasing the marines and the army to stop the downsizing. and navy has been downsizing for quite a while but where are you going to get the sailors commend all those additional ships? you know, you want to double the shipbuilding budget. >> first of all, my understanding is that when john, john lehman laid out a very, very specific plan, there were two elements the governor has already spoken about, and another element that is being

considered. the two that were spoken about were, first of all, the 15 ships a year. and second of all, this three submarines a year. so the rest of it is what we were, would consider. i mean, these are objectives, number one. number two is the question of how you move the money around. and when you move the money and where you take the additional money that is, you know, we predict we would allocate to the defense department. it is not at all a, surprising given the decline in naval ships -- and by the, you know if they will but i don't care how good a shape is, economic one ship in one place at one time. and so, if you want to have two carriers in, say, the arabian gulf, and, which we do, and you want to have two in the western pacific which right now we do but which we can't sustain.

you know the calculus, and what have a carrier moving around in other places, you've got a problem. now, if you want to escorts for those carriers, and the right number for battle group, you've got a bigger problem. you want to have submarines, you have steadily bigger problem. so, clearly you've got to build a lot more ships pretty much to stay where you are in the 300 range. and if you don't have about 300 ships, you cannot simply be and all the places you are, no matter how capable. ships don't fly. [inaudible] >> i don't think he said whether you going to substitute that from the lcs. >> you know, i can't speak for john. and as i said, we're looking at a whole bunch of options. needless to say, if you are talking about open ocean frigate, that's not what lcs can do for you. turn 11, what does it stand for?

a littural combat ship. they came to me with the idea of 2000, i guess you early 2002. he comes to me and he says we really want to find this thing. we have a concept and we need what's called a groundwater maybe she. really a green water navy green water maker ethan brown water. green water. that is to say, something that will not be on the open ocean but what isn't just going up the river like they did in vietnam. and it made a lot of sense to fund a ship like that. what happened is that that ship has come to down it the entire shipbuilding program. which doesn't make sense. >> there was a question about how to pay for this. so the question is, is it another something else in the defense department budget? is it and the federal budget? is in the entitlements? and if so, which entitlements would you change? how do you pay for the speakers again if you're talking but increase, number one, and you

are talking about money out of the overseas contingency operations account, the ocoa account, number two but and to talk about a story economy, which will allow for buoyancy that get you to 4%, and you also count for efficiencies like cutting civil service, which they recommend what, 100,000, so this isn't even an original idea. they are nonpartisan. we do that, i guarantee you will find the 14 billion a year. spent i want to ask a quick follow-up. your description of sort of numerous carrier out of groups, sort of constantly scheming around the world made me think of a question, a very simple one which is what specifically is that force trying to prevent? >> sure. >> it sounds like world war ii spin not at all. not when you only have 11 of them. we were putting out more than those every year in world war

ii. , allyarriers do, and i think i he biggest supporter of aircraft carriers -- it's not the defense department but it's the state department. always has been. and the reason is carrier presence has an unbelievably effective deterrent effect on people. i'll give you a concrete example. 1976, okay, you have this nut case he i mean who captured a whole bunch of israeli hostages. what does he do? he threatened he going to invade. we send the aircraft carrier. he decides maybe it's not such a good idea. carrier presence is very effective. 1996. not my administration to get the clinton administration. we have a crisis with china over taiwan. what do we do? we sent aircraft carriers. chinese back off. 1976, 1996, it will happen again

in 2016. >> this question is for both of you. sort of been packing on the edges of this. go and ask for both of you. talking a lot about ships. secretary zakheim brought up -- [inaudible]. talking about are anxious in asia-pacific. i want both of your opinions on the following. how are the strategic interests, the united states of america, protecting, the next initiation comes in office -- a currency manipulator. speak why don't you start with that because i think that is directed first year and then i can higher on? >> i love to have ladies first

but it ain't working. okay,. >> by president obama has not propose calling china a currency minute or so i will leave that to you. i will also follow-up but -- >> okay, that's fine, that's fine. [inaudible] >> sorry? [inaudible] spent look, i don't have an issue with the. i think that first of all what governor romney is essentially talking about, just to clarify and i going to say too much, he's saying if china wants to trade we need a level playing field to there isn't a level playing field. it ultimately is bad for everybody. because at some point americans will stop investing in china. and he says he's going to lay on tariffs. so he's saying if you guys want to play this game, we can hurt you just as much as you think you can hurt us. now, what would you to the strategic balance out there, which is your question, my guess

is that the chinese will push as far as they can as long as there's no pushback. and my best example of that is chinese behavior in the last few years, in the south china sea. where they kept pushing and pulling, and to some extent they still are. but when the administration, and i give hillary clinton heckuva lot of credit for this, when she basically got up at the asean conference and made it clear that this was going a little bit too far, they backed off. again, in 1996 when carriers were sent to the taiwan strait, they backed off. the chinese will push if they think they can push. they're not the only country in the world by the way that operates that way. but if we, we take that kind of strong action, i honestly believe, would be shocked, and i don't mean in the casa blanca

sense of shocked shocked. timing literally shocked if the chinese were stupid enough to try to make it a military issue out of it. >> so if i could just add, i think, you know, this administration, this has pursued a trade actions against china, you know, twice as many as this predecessor. and there's a question that this president has been tough when he is needed to be tough with china on pushing the on unfair practices, trade practices. we've also been in constant conversation with them over the last four years about undervaluing their currency, artificially. and that valuation started to change and has gone up pretty significantly. needs to go farther but that conversation has had impact. i think we need to step back and look at this more strategically. china is a rising power.

and we have an interest in how that rise is managed. we have an interest in trying to see them integrated into a rules-based order. how do we do that? we obviously pursue cooperation where we can, and where it's in both of our interests. we're also very clear with them, and secretary clinton was when the example. >> host: mention, when they step of online. we will not accept resource disputes being resolved through intimidation, coercion or use of force. we will not accept restrictions on freedom of navigation or freedom of commerce. we will not accept coming to, gross violations of human rights, and said it. so certain rules that we stand up for. i think china understands that the u.s. has played the role of regional stabilizers as sort of, we have undergirded the ability of the region that has allowed

this region to become the economic engine of the global economy. that role isn't going to change. and so, but i think we have to frame this in a relationship that's trying to get china to be a more cooperative actor, and you see it as in their anxious to do so. >> by my watch, i think we have about 12 or 13 minutes. why do we wrap up, so questions from the audience and deny the couple i wanted to maybe ask a few brief questions. winslow spent i don't know if you're allowing -- [inaudible] spent just tell us who you are, winslow and then we will know. >> winslow wheeler. i'm still confused about the 4% and up like -- [inaudible] that i would like dov to take a crack at it. anybody here with the computer

can do to mitt romney website, click on the foreign policy submenu and on that you will find at the bottom of the submenu a defense budget, read the second and third paragraphs and you'll see very clearly that governor romney embraces 4% for the base budget for gdp, and he says there are reasons to do that. and none of those reasons lack of urgency. i'm confused by what you said about the 4%. it's closed up at best and maybe being disavowed -- it's a fuzzy at best. does governor romney embraces 4% of gdp for defense, number one? number two, giving us a sense of urgency, what specific numbers

are you willing to talk about for the first year supplement? as you will recall when governor reagan was elected, he had a massive supplement for the defense budget. there are all kinds of issues about that, but he knew what he wanted to do. >> ask you to get to the question. >> the second question is, do you know what you want to do -- [inaudible] spent yeah, for%. i thought it was precluded by 4% is indeed governor romney's policy. full stop. unequivocal your how do you express it? first of all, as i pointed out we are actually 4.2% so you can move money out of the overseas -- >> not in the base budget. >> the money is there. money is money is money. and it's money for defense so

please move some of that out. >> the larger number will come down under the romney administration. >> everybody agrees as to pull troops out of afghanistan in the number is going to come down. that's not an issue. [inaudible] >> no, no. defense spending our baseline budget will not decline. what you're doing is you're taking money out of -- by the way, these supplementals don't show up against the budget. they show up against the deficit. so you're moving money back into the baseline budget. now, one issue, which i think has to be determined is, for instance, will there be a budget? you know, we don't have a fiscal '13 budget, so if there's a budget can you talk about a supplemental. if there's no budget, you talk about an addition to the budget. budget add-on, right? an amendment. we can't quite possibly know that because that's up to the

congress. another issue is how quickly is the economy growing? what are your revenues like? if your economy is growing your revenue isn't going to grow. under any circumstances it will grow. and so that additionally will provide a buffer or a fill-in to the spending. but 4% is 4% is 4%. if it looks like it? like it, sounds like it, it is it. your second thing was what? >> that's three months from now. shirley you have -- >> again, i don't know how you come up with that number until you know what the baseline budget is. [inaudible] >> how long have you been working on that? this is, this will happen very soon spent it takes two years to work out a defense budget and the administration still doesn't know what is going to do because there's a sequester. >> i cannot answer the 4% number because it's not our number, but

i can see logically come on the question of how do you pay for it, you have only a limited number of choices. either you increase tax revenues from the wealthiest americans, or from the middle class, or on businesses. increased tax revenue. or you reduce entitlement benefits. you make cuts to social security, medicare. not in the future, but you change the contract on people now. if you're trying to get money for next year, you make immediate changes to entitlement, or you make very draconian and deep cuts to the other parts of the domestic spending, the other parts of the budget. so you go after education or health care or other aspects of the federal budget. there are only so many choices you have to pay for this. and my, it's very hard to evaluate this not knowing the answer to exactly what would

governor romney do to support this increase in defense spending, or the sustained level of defense spending, even after the two wars and. >> and would you allow me to give a fourth alternative? the economy grows, revenues grew. that was left out. >> i want to move onto just -- we're running out of time. would love to ask you from afghanistan to iran to libya, will come up in the presidential debates next week, but talk about america's leadership in work and want to ask in the context about security. 30,000 people are dead, by some estimates, by most as was in the civil war. and one of the drivers, although not an age when but one that is critical has been weapons coming into syria, including from russia. even this week the turks forced

a plane to land. it was crossing in their airspace. allegedly carrying weapons for assad's government. how has the president we set with russia increased american influence in moscow? so that one would think the president could convince the russians to act differently. and then i would ask you, dov, to respond or to explain how governor romney in his approach to america's leadership in the world plate carefully so that america might have more influence in stopping the killing in syria? >> so, the reset with russia was simply taking a very clear guide approach and recognizing that you're going to have inches that you can cooperate on an interests were you see things very different way. in areas like arms control,

reducing the nuclear danger, nuclear proliferation and, of course, want to cooperate with russia. in areas where the agreed to allow supplies to come through russian territory to support our troops in afghanistan, of course want to cooperate with russia. the iran sanctions, they're willing to help squeeze iran from of course will welcome the cooperation. syria is an area where we are fundamentally different interests and views. syria is the last russian toehold in the middle east. and they are i think very shortsightedly trying to hold onto the assad regime rather than being part of the solution for what was an invaluable fall of this regime. this administration from the beginning has started with humanitarian assistance to the people. it has put enormous pressure on dov tran tram -- assad. we then added command control

assistance, nonlethal assistance to the opposite on the grant and that has helped greatly to enable their cohesion on the battlefield. now we are flowing assistance to the parts of syria that are free, trying to help them build capacity, provide government services, meet the needs of the people there. and behind the scenes we are focusing, or the administration is looking -- focusing its efforts on trying to get his very fractured coalition of opposition to coherent. because as the opposition coheres and they actually have a transition plan and can guarantee the rights of minorities like the alawites, that's when the situation will flip and that's when assad will fall. i think, you know, i would love to hear from dov, you know, what more would you do? are you talking about militarily intervening in syria?

if it's just providing additional arms beyond what is substantial amounts of arms that are already flowing into the country, how do you deal with the risks that shoulder-fired missiles, for example, they could hit, shoot an aircraft, how do we make sure those don't show up shooting at american aircraft and israeli aircraft and so forth? so exactly what else would governor romney to? because i think -- >> as they say i'm glad you asked the question. let me start out by saying, russia has not recovered terribly well. russia has reluctantly gone along with sanctions on iran. they were the last holdouts. and we watered down the sentient a to satisfy the russians and get a deal. the european union has tougher sanctions than we do. and they just passed more this past week. we lag behind them. and impact the administration took its time improving sanctions that were initiated

either congress. but they were so determined to work the united nations, what, may, so they can say yes, we work with the missions. russians. by the way, the other thing russians, they're selling arms to iraq. you pull out of iraq so quickly, you don't negotiate a status of forces agreement. the president should been on the phone every day to that guy, maliki, and he did not have nearly a shia dictator. night have the russians selling to them, which is where we were in the 1970s when we used to worry about a soviet attack on iran who within our friends by iraq who were the russian friends. very interesting. syria, i am fascinated by the administration's argument that while they know that it is an bad guys are are when they get an intelligent going to give logistic support, when a given communication, all of the they don't don't know who its arm -- who they are when it's time to

give them ours. that's what we should be doing. a government has said that. whatever it takes to get him arms. and if we don't know who the good guys and bad guys are, why are we providing command-and-control support? why are we providing logistics support? how do we know? maybe we're helping the bad guys. made we are hoping all of these people who could inspire, with the communications, the command-and-control support would get, they get shoulder filed missiles and fired at aircraft. it doesn't add up. the fact of the matter is, our policy on syria is nothing short of a disaster. it's very nice for the president of united states to lead. i guess it has a list and spent i'm afraid we're out of time. i want to thank you both species i will bite my tongue or the comeback, but we are out of time. >> but i want to thank you both

for taking time to come tonight and hopefully you can stick around for a few minutes, perhaps for a few follow-up questions. thanks to the audience and thanks to medill for hosting us, and thanks are coming. >> thank you. [applause] >> [inaudible conversations] >> it's finally election day around the country, and along with the president, every house seat, a third o of the senate ad the 11 governorships are up for grabs to be. as well as our proposals on gay marriage, casino family, repealing the death penalty and legalizing marijuana. here on c-span today, take a look at some of the larger policy issues facing the next president. out next the market mortgage and the economy will be followed by foreign policy and the next white house.

then education reform. all that coming up here on c-span2. tonight be sure to watch the results of the presidential race and instant house and governors contests across the country. we will have coverage a president obama in chicago and in that run in boston. victory and concession speeches from the candidates and will focus on some of the more competitive senate seat. we will take your reaction throughout the night by phone from gmail, facebook and twitter. live coverage starts tonight at eight eastern on c-span, c-span radio and, of course, on c-span.org. a look now at the mortgage market in america with former freddie mac ceo charles hogeman. he recently spoke to students at harvard university's kennedy school about his experiences running a large public financial institution and some of the issues economic issues that are facing the next president. this is just under an hour. >> well, good evening. i'm a member of the faculty here at the kennedy school and it's

part of our center, business and government. it's a pleasure to welcome all of you to the cheers lecture which is funded by nasd which is now the private sector regulator of the u.s. brokerage industry. the focus of this series of lectures is on financial regulation, and each year we've had a a leading public official sponsor it someway for u.s. financial regulations. this year our speaker is a tiny bit of a stretch but really not much at all. ed haldeman was ceo of freddie mac from mid-2009 to just a few months ago. well, in that role he was not home at a public regulated he was responsible for running a very large public financial institution. freddie mac and its sibling, fannie mae are what are called government sponsored entities,

gses. four years, described as private companies with a public mission of supporting housing. more simply, as mixed public-private enterprises. when in september 2008, both institutions failed financially. ..

of mortgages financed directly by friday and another $1.7 trillion of mortgages guaranteed with off-balance sheet. together with fannie mae, freddie was responsible for roughly half of the u.s. mortgages made to homeowners. since conservatorship, the amount of mortgages directly on the balance sheets of fri and fanny have declined but their role in financing u.s. homeownership has in fact shot up. today roughly three-quarters of u.s. mortgages are made or guaranteed by freddie and fannie. i have a bit of a rule of freddie and fannie after the was placed in conservatorship. i was on a freddie mac board of head of governance nominating committee. the first ceo of freddie put in

place by the treasury department of the time of conservatorship quit after six months. we had to make a pitch to ed to take the job. it was fairly simple, and most challenging job that was a dramatic understatement. but the opportunity to do meaningful public service. freddie and fannie needed strong leadership and sticky guidance as the rehabilitated themselves and waited for the government to decide just what to do with them. i should still point out we are waiting for the government to decide just what to do with them and it's now four years since conservatorship, and beyond some partisan back-and-forth about the bank's handling foreclosures, housing policy has been one of the elephants in the room during the campaign. ed has had an outstanding career in both public and private

sector leading important financial institutions, having degrees from dartmouth, hbos and harvard law school it started his career with a philadelphia investment firm. ccook and bueller was bought by united asset management. from there he went on to become chairman and ceo of delaware investments and next he was called to run investments here in boston in even larger management for the experience of some regulatory failing by the management. he rode the ship and sold a good price for the shareholders through a large canadian financial firm. it was at that time. freddie end the inning with the broad issues of the involvement in housing finance is one of the major unfinished pieces of

business and financial regulatory reform. it's clearly an important issue. we have c-span here tonight filming this. it has a unique perspective on that issue on an experienced manager from the frontline and the most thoughtful public policy. his ring to talk about where the gse have been and it's my great pleasure to introduce ed haldeman. [applause] >> thanks so much for that kind introduction and injury appreciative of so many of you coming out tonight to visit with me and learn about freddie mac and the gse. i am particularly pleased to be given the glauber lecture here tonight. there are many, many people

perhaps hundreds maybe it would even number in the thousands of people whose career was launched. i'm one of those. bob glauber taught me investment management in 1973 and again as he indicated, i spent approximately 35 years in the money-management industry. so, i don't distinguish myself based on my career being launched by bob glauber but what is special about me perhaps unique is that my career began and ended with bob glauber. [laughter] since particularly this week i think i ought to be careful with the proposition that i learned in that last walls, because bob was on the board, i was the ceo, and the proposition i used was my career ended with bob, not by

bob. this week particularly i am sensitive to making sure everybody knows we ended up our time at freddie mac together. i am also pleased that the subject of the glauber lecture tonight is freddie mac and the gse so i have an opportunity now that i'm no longer the ceo of [speaking french] have an opportunity to present a balanced view of the gse. this is a subject that is freddie mac gse that i've come to see others speak very aggressively, emotionally. it is a subject that gets very heated and uncommon for people to prevent that balanced view. in fact my goal tonight is to present a balanced view and if i succeed i think it may be the first time that there's ever been a balanced presentation

about the gse. certainly the employees that worked with me or passionate about their role, the function that they performed almost a religious kind of mission is what they felt they were doing at freddie mac, and it was hard to imagine that there were other people that have the same kind of visceral feel in the opposite direction about the work that they did come and neither side was able to see the other point of view. hopefully in the course of the next 15 minutes or so you will come to a balanced opinion of freddie mac and the gse is. i want to start with where they've been in and go back in time back to 1938 when the first was created, fannie mae, to think about what the market was like at that point in time

because i think by doing so, we will see some of the advantages and good things that have been accomplished by, freddie and fannie and the gses. the mortgage market was different than it is today. the only thing available were short-term mortgages, five for ten years, variable rates, a down payment. 50% was the standard in those days. it was a bold payment at the end of the term you have to come up with the whole thing at the end of this short term. a very large variations regionally with regard to availability of mortgage money and rates. no standardization in terms of underwriting at all. all of it is done very locally with different standards coming into the mortgage market was not at all connected to the capitol market and as a result, the rates were quite high in those days. subsequently, the mortgage market has changed radically

than i think in large part because of freddie and fannie and the gses. the mortgage market that highly connected in the capitol market, the secondary mortgage function performed by the gses connected the mortgage market to large pools of asset to capital markets including not just in the u.s., but worldwide. there was standardization in underwriting the would require the gses. virtually on the elimination of their ability in rates and liquidities by region. there is a broadening out in the access to the mortgage money in our country before very limited, they brought in and out substantially and most importantly made sure there was widespread availability, fixed rate for the year mortgages. think about what is so special

about mortgages in our country. today, for about a three and half% interest rate you can get 30 year money with no prepayment penalty. a pretty unusual economic opportunity. so those are the early years. they vanish with the gses brought to the mortgage market. let's not think about the years just before the financial crisis and think about where the gses have been in that period of time and the reason it's worthwhile taking a look at just before the financial crisis is that there are many people who have argued and written that the gses cause the financial crisis whether they cause the great recession coming and as bob glauber indicated i was in doubt freddie mac until we after the financial crisis, so why don't really have a stake in this game

the this is a chart i would look at to sort of determine to what extent i thought freddie mac and fannie mae caused the crisis and perhaps we will find a leader contribution but do you think the cause that? and this chart looks at the market shares and the market share of the gse as at the top and the private market, the private secondary mortgage market, so this is the investment bank and the commercial banks issuing the second securities private label securities we call them and will get that radical market share change. friday and fanny going from 75%

down to 40%, and the private label taking tremendous share would be the cause of that? in my view it is underwriting standards. a change from requiring substantial documentation and high underwriting standards, large down payments, many of the private capital competitors reduce some of those standards and were able to take substantial market share. now imagine you are the ceo of freddie mac at the bottom of the market share number. you've seen your market share for the gses go from 75% down to 40%. do you react or not? do you change your underwriting

standards? how much can you tolerate in terms of market share loss? as the ceo i have five or 6,000 employees. it looks like the entire market is giving away, and i think they did make some changes and we each can make our judgment about what we would have done in that position to the climate on downpayment underwriting standards and have that market share go completely away like that. this is another indication of i believe whether or not freddie was the cause of the financial crisis coming in here to get a mortgage default rates over time.

the definition of the default is 90 days delinquent, and you can see freddie and fannie at the worst the delinquency rate got up into the four to 5% zone so the overall mortgage market in the country got to be 10%, and for the sub prime sector of the market, it got up to be 25%. while i believe that fri and fanny did lower their standards, look at the resulting delinquency rates and if you can see a difference between the way friday and the immediate and the way the rest of the industry did. so where i come out on this is that i don't believe gses were

the cause of the financial crisis they did reduce underwriting standards, but i feel i can understand why they might have done that given what the competition was doing. i do think there were some mistakes and problems me at that were connected to the gses, and certainly one that i found troubling was summarized in a book by gretchen morgan sim called reckless endangerment which was a story of crony capitalism exhibited by the two gses and i viewed that took almost as a playbook on how the businesses can execute the capitalism and get close to the government for their benefit not just an incredible lobbying organization, not just massive campaign contributions, but

things like high hearing repeatedly people coming out of the government opening regional offices in all of the critical congressional offices and hiring relative of congressmen in order to build those regional offices. so, to be sure some of the criticism that is offered is accurate. a second problem was the government guarantee. this wasn't something that necessarily was generated by the gses but they took advantage of it because rather than the government guarantee was a borrower essentially as much money as they wanted to add the government rate so unlike most of the private companies when you put on more and more the rate goes up they were able to

borrow almost unlimited amounts that the government raised and then create a retained portfolio which some people have described as a hedge fund because one was able to or which was the difference between the government rate and the rate that they used to buy in some cases private label securities. so, i don't think they are without fault, but i do think it is a stretch to call them because of the financial crisis. so let's talk about what the gses have been subsequent to the crisis since they've put into conservatorship that's the time in more familiar with and one of the things they have done and one of the reasons the took the job is that they had been the only game in town for the mortgage market, and here the

numbers accounting for 75% of the total mortgage market if you add fha, another government mortgage provider you get to about 95% come as a private market has been providing only about 5% of the mortgage money where we'd we have been over the past three or four years without them performing this function? in addition, we worked with the administration and the treasury department in order to execute some of the government programs, home affordable modification programs and home affordable refinance programs. and you can see that the number of modifications done since conservatorship is 1.2 million homes. the only problem with that

members on the idea of modifications first were generated, the program was quickly taken over by political people in and close to the white house and they decided they needed to make an announcement of what we were going to do and they said it was going to be three or 4 million modifications. i have no idea how anybody got that number but somebody wanted a big number and as a result, 1.2 has always seemed like it wasn't very successful. it's a pretty big number, and they executed on not just the modification programs, but also the refinance program. one of the things we didn't do was we didn't do principle forgiveness, and that is some of you have red criticism about us

not doing principal forgiveness. there was a risk of strategic default were we to offer a program of principal for defense which is to say that freddie has lots of underwater mortgages, over 80% of them are still current and have no problem and continue to make an obligation despite being under water and we worry about the principle forgiveness in the underwater mortgages and we thought better to focus our attention on harp rather than add principal forgiveness. want to spend just another part on the record subsequent conservatorship which would be profitability. many of you have read about

freddie mac and fannie mae being a black hole. the record in front of you chose to bars. one is the amount of draw that we have taken from the federal government, and the green bark is the amount of dividends paid and what a lot of people don't recognize is the dividend that we have to pay now are $7.2 billion a year so if you generated $7 billion in income you would still have to draw something from the government and that's why people continue to talk about the draw. if you look at that total record for the entire time of conservatorship, the round numbers are a draw from the government of 70 billion dividends of 20 billion the meaning a net job all of 50 and you can see from 2008 when that year was done it was 48 billion. so almost everything subsequent

to 2008 required to pay the dividend that is a neutral impact on the treasury. the reason we've been able to get to that level of profitability is that all of the mortgages that have been put on in the last four years of the conservatorship have been very high quality in terms of down payment scores much higher than the case prior to the conservatorship the conservatorship accounts for 60%. we talk about the time period of 1938 and we took a look at the crisis period and looked at the post conservatorship let's move forward and think about what to do it freddie mac going forward. it has been a great frustration

to me that the treasury department has come up with no program, policy or recommendations as to what to do. it's 50 month that we've been in conservatorship and its 50 months 6,000 people work at freddie mac don't know if the company is going to exist and have no job security at all. if the treasury was to put out a position paper in january of 2010 with a suggested solution, they didn't do that. they didn't come until january of 2011, and then they listed just three options that would have been obvious to anyone so it's a great frustration that we made no progress in this area particularly when i believe there is strong consensus on what we ought to do. there's a proposal was put forward in august of 2009 by the

mortgage bankers association, which talks about forming companies, private capital companies that they call mortgage credit guarantee entities which would be three to five in number that would be private capital companies that would compete with one another that there would be no government guarantee of the companies, there would be a government guarantee of the securities, the mortgage-backed securities, but for that guarantee they would pay an insurance premium much like the fdic insurance. the securitization would only be a plain vanilla kind of mortgage and anything would have to be done in the private market and there would be no retained portfolio at all. so we have this proposal, a

sensible proposals in august of 09. three years later a smart guy who was of the treasury department and is responsible for the restructuring of the ig -- aig as a lawyer and a restructuring type of person and he put out a proposal which has many common ingredients that we saw from the mortgage bankers association. here the emphasis is on a government agency and the federal mortgage insurance corporation which authorizes management and a series of securitized nurse who issue mortgage-backed securities, and again the companies are not guaranteed just the securities are and the beauty of both of these proposals is that the technology and the

infrastructure and the systems and the human capital wouldn't be wasted but could be on the basis of one of these securitized terse that would compete in the private capital market going forward. so i believe that there has been some consensus around a proposal that is feasible would work and one was issued by somebody that had an ax to grind of the mortgage bankers association, but coming from the treasury department presumably his view is what is best for the economy but it's a very similar kind of proposal in my estimation and i wish that we could move ahead with something like this, and it could be a tremendous benefit i think for the taxpayers to get some usefulness out of this investment that they have made in the gses keeping them together and functioning to use

the skeleton and the infrastructure and a way that allows the taxpayer to get a benefit and to get some dramatization of the investment that has been made over time. so, in summary on this where should we go, i think the most important thing is to go somewhere soon. it is incredibly challenging to work at freddie mac and fannie mae to have this uncertainty if you have a future. it is debilitating. the entities are becoming less corporate like and more government like and from my point of view, that is regrettable. i hope i have given you some insight into where we have been with the gses, where i think we ought to go, and i would be interested in your questions. [applause]

>> let me remind all of you of the ground rules. we ask you to identify yourself and we ask you to do something very simple, to ask a question rather than make a speech and that the question would be reasonably contained. i am going to ask the first question. you have said where you would like to go and you are concerned nobody is going there yet. any forecast when you think the congress is going to go somewhere and with the process will look like? >> i made my decision to leave freddie mac because i thought it was going to take a long time before we would get resolution. i joined the company in the middle of 2009, and at that

point everyone was certain that the company would be relaunched in some form in a couple years, and obviously we've been disappointed in that, and as the calendar rolls through three or four years, i've concluded looking at my birth certificate that i probably wasn't going to make it, and that was one indication of my pessimism about when we were going to get this resolved. it was clear to us that as we got into the election nobody was going to spend time on it and it's been remarkable how silent the candidates have been on the subject given how much is at stake. and i think once we get the election over and get the new congress established, they've got an agenda with more

significant things like tax policy and policies on deficits. so i think this could be -- we have to wait a good long period longer before we get any kind of action on this. and then there's the implementation of the way. i'm just talking about when somebody puts out an idea which has to be challenged and then you get something passed and you've got your implementation. after all think about where we are and implementation on dodd-frank and implementation in terms of obamacare. i am very pessimistic about when we finally get resolution. >> i'm a student at harvard business school and kanaby business school. you started your remarks on the political influence that fannie and freddie mac has been for the conservatorship.

as we think about the entities that will follow how do we think about creating an appropriate amount of political insulation against lobbying when it comes to capital requirements and the guarantee? >> that's a struggle. i can tell you that during my time, dillinger the conservatorship we had released all restrictions. we were not able to make any contribution. i personally was not able to do it. i happened to go to law school with a couple centers. i wasn't able to visit with them even in a personal sense so it was precluded from interaction with any member of conagra's whatsoever. we had to go with our regulator.

before i got there when we were placed in the conservatorship initially all of the lobbying was stopped and people were let go so during this period of time i can tell you it's been totally insulated with a couple exceptions which were really annoying to me which were a member of congress who felt like who would call on my personal cell phone i don't know how they got it trying to make me intercede on some action the company was about to take in her district presumably some kind of a foreclosure kind of activity that had gone through the process the was an attempt in

that direction a little bit pessimistic about your question i think when you get to the resolution, one would hope that we have private capital companies which would be regulated very closely with restrictions in that kind of thing that have to have strong leadership on things that don't buckle to the pressures that we see it but it is a problem, and i guess the reason that i'm not too pessimistic is because we have gone through this period what time where the two gses have been incredibly disciplined

>> have you come under any pressure to ease that stringency during the spurt of. >> very modest and there would be statements made by members of the treasury pretty and the administration suggesting that we were too tight or the ever that we would get a little bit of pressure is how aggressively we took to the financial and institutions reasonable not particularly troubling. >> i'm a student here at the kennedy school. i really liked your charts and everything is helpful. it looks like we focus primarily

on the single family side of things and i would like to hear what you think about for the family portfolio. >> thank you for that. i'm going to grab some water. this is the second time i've spoken in the vice presidential debate and as a result and as i said some water wonder if it is too much, too little or appropriate. so the multi family is a great story at freddie mac and it turns out that it's about 10% of our business, but it's a very, very successful business, and it's one where we have had -- i showed you the chart on the single-family delinquencies and they were low relative to the industry half as much a matter what time period you look at. the multi family business had an infinitesimal the fault right consistently throw the whole

thing maintained high profitability throughout such that many people have been anxious for that business to be spun off individually as a stand-alone kind of business, and that is something that is feasible and another way that taxpayers could receive money, but i am really proud of the effort that we had in the multifamily. it's a great team and i think could be a very successful stand-alone company going forward. >> hello. i am asking this question on behalf of the committee. in the current revision of the fannie mae and freddie mac bailout would you say they've lost the ability to recapitalize themselves?

>> i think the traditional way capitalize themselves, yes, because of the 10% dividend requirement. so, when most institutions use your word they allowed there was a 5% with an ability to repay that. at freddie and fannie it was with no ability to repay so as a result of that, the ability to recapitalize themselves isn't really there and the numbers are the total drawl in the round numbers is like $72 billion meaning that the dividend payment annually is 7.2 so really, really hard to generate

enough capital to meet that dividend and then accumulate on the balance sheet so you would have a chance of recapitalization. >> i'm a senior at the college and thank you for taking the time. you begin your talk by discussing some of the important advances in the mortgage market after the introduction of gses and i wanted to know your opinion what extent do you think a more purely private sector driven solution is able to achieve the public goal of the gse. >> let's hypothesize no government involvement. you remember that the suggestion that i made had what i think is limited government involvement in the private capital companies none of which are too big to

fail or have a government guarantee but the mortgage backed securities that the issue would be government guaranteed and there would be an insurance premium paid for that guarantee, said that is the extent. let's hypothesize now to go to your question that there is no ultimate reinsurance, alternate government backstop of the security. the disadvantages to that i think are largely in the cost of mortgages the mortgage rates would be higher as compared to my suggestion and the reason is i think there are big sources of capital worldwide that will only invest in our housing mortgage market if there is some kind of

ultimate government backstop. there are big pools of assets in asia for example but will only invest if there's an alternate government backstop. i visited during my tenure with some of the holders of the freddie mac securities from the foreign institutions and they said they wouldn't buy any more and they were reducing their holdings even under the current state of affairs they were not exactly comfortable with the government guarantee and they would have that guarantee if they were going to invest in our housing market, so for that reason i am willing to tie that limited amount of government involvement. >> you just said that without

government involvement it would be a higher price for mortgages and a bit to do agree that the consequence of just run in the private market would be higher mortgage costs. would be the consequence of that and what the consequences be good, bad or not matter? >> the consequences of the higher rates? well, i think they would be significant. that already we are going to narrow down the universe of possible home buyers because the down payments are so large and the new compound that with higher interest rates ulmer that

potential universe of home buyers down to a level i think is unacceptable in american society and we definitely went too far towards the goal of making everybody a homeowner and we have that single-minded objective of getting that percentage higher and higher but i think that if you compound a 20% down payment with significantly higher mortgage rates i think we would be nearing the universe of home buyers in a small group. >> i'm a sophomore year the college and i'm wondering if you could talk about the climate and culture that he experienced when you assume the leadership in 2,009 considering all that's transpired in the months before, kind of for the expectations and pressures that he faced.

>> i will try to describe a little bit. so, five or 6,000 people that work on this many of them like people employed anywhere in our society had invested a lot of their money in the company had stock holdings and many people were proud of the company and they buy stock in their company in the their holdings went to zero. sinnott saying everybody had 100% of the 401k but there were big holdings that went to zero and then the people were criticized by politicians and the press as being the cause of the financial crisis.

these are people who literally believe they were doing great work helping people and somebody accuses them of the financial crisis. many employees told me when they would wear a freddie mac t-shirt to the supermarket or home depot they would be told what they'd done. as bob indicated they were put into conservatorship and six months after the ceo arrived in the conservatorship, he left. two months after he left, the person who was the chief financial officer age 42 took his own life. there wasn't fraudulent activity but because of the stress so the employees have that list of thoughts and pressures with no

job security, no idea whether the company is going to exist. remember that there were senior politicians who repeatedly told the press for andy should be abolished in the white paper that the treasury put out they said many, many times the company should be rounded down. imagine the four -- morale. because of that i tried to spend as much time as i could be invisible and talking to them and trying to come up with hope for the future which was around this notion of us getting ready for launching the company in some form.

they continue to work hard and the company is functioning quite well. >> i wanted to ask you for your perspective on your reaction to the perspective in the book fault lines. when among other things he calls for the need of cycle prove regulation. when he observes that we come up with great ideas like you articulated. we come up with those but in better times they get dismembered and political pressure is applied to them under what they call credit populism so we need to figure out ways to build regulation that somehow that won't happen or they are immune to those pressures. any thoughts on how we can do that?

>> it's a great thought and only partially facetious and the only way i know to prevent the problem you are talking about is to make sure that there are people around who have lived through many cycles and have seen the movie before, and i know that's true in the investment business where i've spent most of my time that the enthusiasm builds and builds and people become more aggressive as things go up and up and up and inevitably they reversed themselves, and it seems like a

new generation needs to go through that. so that experienced and having people on staff who have long through a few cycles is a great thing to have and trying to insulate regulators from the political process is an important thing to do and we certainly didn't get the right at the gse and if you haven't read reckless endangerment, you should because you can see how there was an attempt made to take the teeth out of the regulator because if they got to make aggressive they could just call people on the hill so that's how you might be able to accomplish that.

>> let me take one last question >> i met the center of business at the kennedy school, think you very much for your talk. a question on the campaign. you said that there is a proposal from the treasury in terms of what to do next with the gses and in the obama administration little something along those lines after dealing with the fiscal cliff and tax reform and the other issues on the agenda. what about a romney administration and what sort of proposals if any have been articulate it? >> let me make it clear there hasn't been a proposal in the administration. they produce a long awaited white paper in january of 2011 which laid out three options and those options were a solution, government solution or hybrid solution. i'm not being very facetious

here in saying that, so we haven't had a proposal from either side. hysterically a democratic administration will see some of the good things that the gses have provided that go back to my opening charts about how the market has changed and keep something like them around and the republican administration as it came would want to go to a free market kind of solution without any gses. i would hope that the suggestion i made and the mortgage makers would be seen as something both sides could live with in that it

is largely a private capital solution. there is a day freddie and fannie, there are the five private capital companies competing who have the ability - to pay a premium in order to get a government guarantee of their underlying security. i would hope that would seem enough of a free market solution if the republicans were to be okay with it and enough of a protection in the housing market that the democratic folks might find it acceptable. >> okay. thanks. thank you. [applause] in mclean virginia from the northern part of the state. they consider to be one of the key swing states and today's election. along with the president every

house cede one-third of the senate and the 11 governorships are being voted on today and also proposals on gay marriage, casino gambling, revealing that penalty and legalizing marijuana our cameras will peak in throughout the day. both mitt romney and president obama have cast their votes already. governor romney this morning in massachusetts. people are heading to campaign stops in cleveland and pittsburgh. president obama cast his vote 12 days ago in his hometown of chicago. historic event after he was the first to take part in early

voting the president will be spending the day doing radio and satellite tv interviews and sticking with his ritual of playing basketball with his friends and close advisers today. earlier we spoke with l.a. times reporter about what to look for as tonight's results start coming in. is that we've been highlighting how newspapers across the united states have been treating electoral maps that we continue on the last day of doing so looking at the "los angeles times" and joining us to give their take on how the maps work and what you can learn from with the "los angeles times" easy washington bureau chief. welcome. >> good morning. how are you? >> as i pulled them up we have it available but can you give a sense of where each candidate stands when you look at the results of your map? >> you start with the assumption that most of the states are already pretty well decided. you have a lot of solid

democratic states and a lot of solid republican states coming and you've got this handful of battleground states and between which we try to have our map focus in on because we want the attention of the states that are really in the play. >> so if i see it right, i see eight states that you determined in place; media there's more? >> that's right. we have moved some from one category to another as the campaign has gone along we started out with a slightly larger number, and over time a couple of those have moved out of the category one state wisconsin move on to the list after paul ryan was josette mitt romney's running mate but by and

large they dropped off. most recently we moved to nevada off of be in play list of the leading democratic list as it became clear to the polls and eventually from the early voting statistics that president obama was giving of a pretty strong lead in that state. >> so as the map comes together, what date does the "los angeles times" used to determine? >> we use a mixture of things early in the process. you are mostly relaunching on the public polls as the process goes a long to other things factor into it and one is the reporting that our political staff does. we've had reporters in all of the battleground states as it

goes along. we get a lot of information from our reporters and as one's early voting get started, we've been and it's particularly important in nevada i was also important in north carolina we had moved north carolina off of our battleground list because it seemed like the public opinion polls were suggesting that the republicans had a fairly strong lead that it wants the early vote came in, they were very similar to 2008 in which president obama very narrowly won the state. so, we move to north carolina backing to the aim play category. >> we're looking at the map on

a ipad. what features would you have for the viewer is looking at the map? >> the most attractive feature for people coming to the map of the website, latimes.com come as with many interactive maps and the one son in previous years, you can play around with it, and you can make your own predictions of how you think the key states are going to fall. we find that a lot of users like to do that. it's a particularly attractive feature. >> so, david come as you will get this day on these states what are you watching for? >> i will be watching virginia in part because they have the early poll closings so it will be probably of the battleground states it will be the one that we will get the first clue which way the election is going.

ohio of course is the state that everyone has been paying most attention to and florida is a perennial contender but both of those states could be pretty late in telling us very much, so virginia could give clues if there is a late surge of voters that haven't been picked up in the polls that would be evident. similarly, if obama is getting a large turnout among minority voters, which is crucial for his reelection, that would show up in virginia. so come early in the day, early in the evening i will be watching and i guess i will be joining everybody else in watching ohio with any attention to hamilton county in cincinnati

and the counties just outside of hamilton. in 2008 he was the first democrat to carry the county since lyndon johnson. he will probably need to carry it again if he is going to win ohio. all the other side, those counties just outside of hamilton in particular is a very large republican county. john mccain underperformed there. if mitt romney is going to carry the state he will have to do much better. >> david lauter is the washington bureau of chief of the l.a. times. latimes.com is where you can find information and putting their interactive map on this election day. mr. lauter, thank you. >> always a pleasure.

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the presiding officer: the senate will come to order. the clerk will read a communication to the senate. the clerk: washington, d.c, november 6, 2012. to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable harry rei, a senator from the state of nevada, to perform the duties of the chair. signed: daniel k. inouye, president pro tempore.

the presiding officer: the senate stands adjourned until november 9, friday, at >> we'll be watching races, and get reactions, facebook, and twitter, live coverage begins tonight at eight eastern on c-span, c-span radio, and, of

course, on line at c-span.org. while you watch, use computer to access maps with ap election results with updates on the balance of senate and house, track the state balance initiatives in realtime as results come in at electionhub at c-span.org. >> i watch the morning journal, the give and take there, the balanced approach, and i like to hear the callers. never called myself, but i like to hear the callers, some unusual to say the least. c-span's everywhere. c-span in washington is just an every event, small hearing, public policy meeting downtown, just seems to be there. >> steve austin watches c-span on verizon. created by america's cable companies in 1979 brought to you as a public service by your television provider.

a former chief cia analyst joined a group of foreign policy experts to look at the challenges facing the next white house including how to deal with iran's nuclear program, prospects for an israeli-palestinian agreement, and clashes in syria. the middle east policy council is the host. it's about two and a half hours. >> before we go to the distinguished panel, i want to make introduction remarks just to set the stage, and then the panel will speak, and then we will have questions. this is about policy choices facing the next administration, whoever's going to be leading it. he is going to have some decisions to make. on israeli palestinian questions, will the next administration resume the peace

process in order to seek resolution of this conflict through establishment of the two-state solution. will he be willing to extend political capital on this? is it in the national security interest of the united states to solve this and get a two-state solution to this. various members of the current administration said so, and if it's true, it would be good to succeed. there are others who are not so sure that it's achievable or that political capital is worth spending on it. that's an important question, important decision for the next administration if the next president wants to do this, he's going to have to build a domestic constituency to overcome opposition. on the question of the iran-syria, hezbollah actors, the administration will have decisions to make about sanctions, about diplomacy,

about war. if the iranian regime comes to the table with serious intent for any reason, either because the sanctions were biting so hard or worried about threat of military vikes or for any other reason, my question, as an individual, is will the american government take yes for an answer, or will the american government have conditions that are -- cannot be met by the other side? will the administration even consider what was previously called a grand bargain to attempt to resolve all outstanding issues between the united states and iran including what should iran's role be in the region and what kind of attitude should they take towards the conflict and any potential peace agreement, or would the next administration actually engage in military

strikes against iran? i would just note there's three studies out recently. you might want to think about one by the iran project which has a title of weighing the costs and benefits of military strikes. as the title suggests, weighs the costs and benefits. it's comprehensive. one issue it doesn't touch on is covered by another report published by the university of utah going into depth about the casualties that would result from military strikes, the death and the injuries. timely, there's a report by the bipartisan policy council group which goes into the cost of allowing iran to get a nuclear weapon. the economic costs they think

follows iran getting a nuclear weapon. it's a big issue to consider, else the next president. when i comes to syria, such a difficult case in the arab awakening, and one question that's current is if we gave them heavier weapons, does that promote the down fall of the assad regime and provide the rise of a rebel opposition that would be friendly to the united states or fall into the wrong hands and result in militias with weapons that could do to any western power, to the united states, what was just done it our ambassador in libya. are there prospects for democratic, pluralistic regimes after assad, and do we have a role in a post-assad transition,

or would we will putting our people in harm's way by trying to do that. when it comes to other cases in the arab spring, jocelyn might want to correct me, but it looks like we have a president from the muslim brotherhood establishing a very strong executive authority, and there are questions whether we should be giving them foreign aid. in bahrain, for example, there's a non-nato ally with a record of progressive reform still attempting to significant support especially from international human rights organizations so how much reform do we ask the regime to engage in or how much plays into the hands of anti-democratic forces

in bahrain? finally, when we come to the gulf, and i testify from this from many trips to the gulf, we need to decide what kind of relationships we're going to have with the members of the gulf cooperation council, who has security issues that they need to contend with, know very well that they can provide outstanding equipment, but at the same time, they have some questions about the extent of the security commitments to them, particularly, gimp the way the administration rather quickly called mubarak to step down. they want business ties with the united states, but they want business opportunities elsewhere. they are very disstressed by our arab-israeli policies, very disstressed. i hear it all the time.

now we know policies towards iran and syria and worried everything we might do with iran, even diplomacy they fear might provide iran with some advantages, and they are concerned about our domestic islamphobia and wonder what relations they can have with us when that kind of thing occurs here. those are my ideas. i now want to turn it to the panel, and on the back of your inviation, you have extensive boy owes so i won't repeat everything that's here, but our first speaker, scott mcconnel,

founder of the "american conservative" founded to give a voice to the neoconservative movement, and he identifies himself as an ex-neoconservative and wrote for magazines like "commentary," and he's the former columnist and editorial writer for "the new york post," has a doctorate from columbia university, and he's written for our journal, and his articles in our journal have been some of the most popular that we've ever publishedded. then i'd like to go to jocelyn cesari who is senior visiting professor at johns hopkins center for middle east studies, directed the initiative, and she's also the directer of the international research program called islam in the west at

harvard university. she splits her time. she's political scientist from the french national science for scientific research, wrote several books on islam, globalization, democracy, and civilization. the third speaker will be nathan kern providing decisive reports on middle eastern, economic, and political issues, particularly, oil in the gulf. you can find his reports op our website. almost weekly? >> monthly. >> monthly. and, i believe, the first foreign stay tuned -- student to attend a university in saudi arabia.

the fourth speaker is paul pillar who spent 28 years in the intelligence community, had high ranking positions in it, including executive director for the -- the director of the cia, and his final position was national intelligence officer for the near east and south asia providing analytical support. he was a visiting fellow at brookings in the year 2000 and reserve officer in the u.s. army and publishing extremely important literature in the last few years since retiring from the government. we have a good panel. i'll step out of the way now,

and, again, thank you for coming. when we do finish this, there will be a question and answer session. thank you. >> watch all the wires. >> i will. >> good morning. what are the prospects for a new president achieving a fair peace settlement between israelis and the palestinians? i believe, unfortunately, they are not very good, but by a fair settlement, i mean a two-state solution, a palestinian state on compromising gaza and the west bank with minor negotiated land swaps, control of the borders, its water resources, its air

space. something similar to the clinton parameters of 2000. i believe this outcome more than any alternative satisfies the core needs for security and self-determination of israelis and palestinians. as you know, every american president since lyndon johnson tried to stop israel from building settlements on the west bank because they understood those settlements threatened to fore close the possibility of a two-state solution. some presidents pushed hard; some not very hard. at camp david, jimmy carter believed he received assurances that building would stop and self-determination and would commence, but settlement building did not stop and carter and the egyptians for different reasons did not make too much of a fuss. ronald reagan called for a settlement freeze without making a big issue of it. george hw bush made an issue of

it paying a steep political price which may have cost him re-election. bill clinton wanted a viable state, and he found settlement building cometted whether israel was headed by labor, and, indeed, accelerated throughout the 1990s. barack obama made a settlement freeze that jumping off point for his peace efforts, and he was smacked down decisively by benjamin netanyahu. the reason is obvious. israel, no matter what coalition was in charge, wantedded to build settlements on the west bank more than the united states was committed to stopping them. the israel lobby, described as a lose coalition of groups and individuals committed to ensuring american backing for israel, no matter what israel does, was able to generate enough political pressure to thwart serious american

diplomacy to stop settlement building. nevertheless, something important is beginning to happen. the israel lobby is exhibiting cracks and weaknesses. i believe we are witnessing the beginnings of a historic transformation in which power will be considerably diminished. first, the democratic party. on the second night of the convention, roughly half the delegates in the hall, perhaps a quarter of the 6,000 voted no to what party leaders assumed was a routine platform resolution amendment stating jerusalem was israel's undivided capital. such planks appeared in both party platforms before, and in practice, presidents ignored them. not much of substance was at stake, but in the spirit, at the emotion, the route of political change, a great deal happened.

i'm sure you've seen the video. three votes, three courses of no, as up planned as they were unexpected. big parties descended on the television booths to play down the episode. allen described the nay sayers as role elements, anti-americans, and anti-zionist jews. 1800 of them apparently. what took place is nothing less of a rosa parks' moment. i'll quote one reaction from "commentary" magazine, now a republican publication. this video should show every pro-israel democrat, scratch that, every pro-israel american to the bone. they rely on support from the united states, its strongest ally. the floor vote at the democratic

convention pretends a day when that bipartisan support will cease to exist. as tom said, i'm a former neoconservative in another life. i used to write frequently for "commentary," and goodman is correct that the vote does, indeed, portend such a day. how far in the future? i don't know. it was a decade between rosa parks' refusal to move to the back to the bus and the emergency of a sufficiently powerful appty-segregation consensus to pass civil rights legislation. for a major party to be devoted to fairness between israel and palestine takes at least that long, but the reason allen and "commentary" found the erosion of bipartisan support alarming is partisanship let loose a tore represent of a competitive dead about the morality and utility about america's special

relationship with israel. israel's treatment of the pal stippians under the occupation would be subject not only to academic and journalist tick scrutiny as it is now, but to political polemics. something like the openly expressed skepticism about israel's behavior now ordered on elite university campuses would be widely decimated. this survival depends on its own rule of discourse. israel's value to the united states is held self-evident, issues and values congruent to america's that any criticism has to be deemed margal, weird, motivated by bigotry. those who question the consensus are not debated and smeared, but once the seal is broken, i believe, and 5 lot of goodman believes the notion it's a

metorganization physical requirement to have it a touchstone of policy could unravel at rapid speed. resolutions voted upon at the national methodist and presbyterian conventions this summer. neither passed, but the presbyterian fell short of two votes out of 600. leaders of main line churches made a formal request to congress to investigate israeli human rights violations to determine if israel is violating the terms of use of the american weapons it receives. for a long time, protestant churches have been in relations with mainstream organizations, on which they built historic alliances on civil rights, vietnam, and on church state

regulars, and, yet, the churches have ties to the arab world as educators and missionaries and social workers and refugee camps and have arab co-religionists. they see themselves as promoters of social justice. historically, this tension has always been resolved in silence not to upset relations with american-jewish leaders. that period, which has lasted since the founding of israel seems to be now over. to attack iran or support a strike or accept israeli timetables. this involvedded some firm public language. the chairman of the joint chief saying we don't want to be come police sit in an israeli attack. secretary state clean -- clinton rejecting the lines, and

president obama not meeting with benjamin netanyahu in new york. of course, this was not over palestine, but over an issue with more immediate and obvious economic and security implications for the united states. it was the unmistakenble defiance of an american president in a very long time. i assume the election is now a tossup, the events i referred to were followed by obama's largest lead in the polls this year. if obama loses, i think we can say with assurance that a public disagreement with prime minister benjamin netanyahu had nothing to do with it. i could point to other areas, but you get the idea. discussion of israel and palestine opened up in historic ways. the congress is a lagging indicator rolling out resolutions by the margins everyone is familiar with, but one day, the glass nose

penetrates up here as well. what relevance does this have for the next president? unfortunately, i fear not very much. i won't say much about mitt romney. i'd love to be proven wrong, but on the basis of the public statements, private comments that have become public, and choice of foreign policy advisers, there's no chance he will be engaged in starting a peace process. obama's a different matter. he wants a palestinian state. he was decisively rebuked in the first year and a half of the administration, couldn't persuade israel to carry out a settlement freeze, much less withdraw from territory. could next yeah be different? i fell into the camp of those who think the time for a two-state solution has probably passed. israeli settlements recolluded the possibility. there's settlers committed to

staying there. it's not clear any israeli government could remove them without risking a civil war, and though there's mild israeli polling majorities in favor of a two-state solution, there's no significant israeli constituency for giving up sovereignty over east jerusalem, and the palestinian state without the capital is a non-starter. there's now one state between the mediterranean an jordan river, a state connected by a highly developed infrastructure of roads and water pipelines. i'm not sure when the point of return was passed, seven years ago on my first visit to israel, it was plausible to speak of a palestinian state. now it does not. i believe any normal diplomatic process, appointment of enjoys, building on previous agreements, such as those arrived at under prime minister olmert and barack

don't have many political success. there's no favor in withdrawing from the settlements that israel would have to do to allow a viable palestinian state. prime minister ben beep gave lip service to the idea, but people close to him have said they would never offer the pal stippians something they could accept. the west bank, areas a and b, cut off from the world without control of their air space, their water will not produce a viable state. what can the next president do to change this? the only intervention to shake israel out of the spiral would be if a president made clear where the united states sees this heading. absent a two-state solution, israel is en route to becoming a partide state. they will not accept

palestinians voting or civil rights so we're headed towards a state roughly half pal stippian, half jewish, one group denied political and civil rights, the other group possessing them. could president obama cite words that previous israeli prime ministers said warned quite unambiguously that they were have a situation in the absence of a two-state solution? could obama tell israelis that regardless of who is president, it will be very difficult for america to maintain a special relationship within a partide state in the middle of the middle east that such an alliance could contravene america's values and interests and once the relative question is whether palestinians should have equal voting rights as jews, it will be natural, given america's democratic ideology and history, that had support

pal stanian rights. failure to do so won't make sense to americans, and in a practical sense, renders impossible for united states to speak on democracy or human rights in the middle east or anywhere else in the world. in other words, the center piece of the president's intervention is shifted from the palestinians and their historic suffering with the need for self-determination. i'm sure most israelis don't care very much about that. it would be about american values and american interests and where israel fits into them. i'm not sure that such a speech, perhaps accompanied by diplomatic measures such as not using america's u.n. veto on u.n.'s behalf or perhaps even supporting pro-palestinian measures, would change the political call cue louse in israel. perhaps, it would have no impact at all, no impact at all.

do i think president obama would speak something like this? of course, i don't. if the israel lobby is wager, it's still powerful. america is not yet ready for a presidential approach like this. a re-elected president obama would have more pressing priorities bhdzs viable state in palestine and priorities more easy to achieve, but i don't think anything less dramatic or forceful has any chance of success. [applause] >> thank you. i hope you're wrong. the next speaker will be

jocelyn. >> good morning. i would like first to thank the middle east policy council for this gathering of this debate. i would like preface my remarks on the changes needed in the u.s. foreign policy vis-a-vis the countries going through what sort of called the arab spring, now the arab awakening, and i'd like to first say that we once -- a lot happened now since the rev luxe of last year. we, i say we from an american approach, we saw the tahir protests, a sign of democracy that we thought once was not there, and then after the

elections, we were disappointed by the victory of islamists, and in the last six months, went from one to the other to disappointment, and now we're in the pessimist phase in the span that recent events like the protest because of the muhammad movies led policymakers to link the failure of the arab spring with the unfortunate episode so my mawk really focuses on the fact that democracy is value that is now shared by the majority, especially the young people of all muslim majority societies. that it mean that it's a democracy we experience in the west and especially in the u.s., probably not, and we have to be

aware of that, and basedded op this assessment, i would like to draw a few elements for change that's in foreign policy. in some way, the west and, therefore, the arab spring showed the west is victim of its success. in the sense that the revolution and the tahir protest, democracy values are not anymore, i would say western, and these have not been thought through sufficiently. we are not paying attention enough to the fact that democracy is per sis tently praised by members, citizens of muslim majority countries. most people polling that

repeatedly show that actually in some instapses when their polls, people say they are more in favor to democracy than the average spot you can find in a western country. these democracies still there despite, i would say, the questioning or the skepticism around the new regime that came from elections. people also disconnect the limits of the new regime with the hope for democracy. i think it's important to mention this positive outlook on what's going on, and we tend, unfortunately, to go quickly from one assessment to another without taking into account what's there, societies in favor

of democracy, and we knew it for a long, long time. this didn't come with the arab spring, but it was already there, and, in fact, in the investigation that are available to everybody. this is the first thing. the second point is what kind of democracy are we talking about? in this regard, i'd like to make a difference between the consensus of the principle of political, political freedom, freedom of political express and opposition. in other words, the fact that rulers can be elected, change from one to another, is pretty much grounded in most majority of this country. it means we are witnessing the

secularization in the american sense in these countries? probably not. probably not. we also have to disconnect a few elements that we have considered the whole situation, democracy, and rules redecline of religion in public space, and this, we have to be very aware this is not happening, and as it stands, the protests begins with the movie show us that islam remains very strong marker of the public space. from the west, it's difficult to understand because we think religion is private, religion concerns only our beliefs. we have to understand that it's not true for muslims, but i could talk to you about india in the same way. we have to understand that for

muslims, is leam is not just a question of blee, but it's a question of belonging and being the national. what do i mean by that? it's not because as i hear everywhere they practice politics and religion looking at it wrong. the building of the nation states, even by the elites, is leam is embedded nation building of the state. what do i mean by that? it's creating connection between being the national and being the citizen. this didn't come from islamists.

what is frame work that was already there. they were there, major debating in tunisia how to remove laws that function people who would say something insulting against the prospect of the religion. this was already there under the regime, and so, again, we have to be very careful, and how we access these events in a more, i'd say, complex picture where instead of looking at islamists, representing secular space, we have to take into account what are the situation of the citizens? what is the situation today that also influence the interaction with the islamists? i think we -- we have not done that, and it requires a very

different outlook on -- on what's going on meaning accepting that, indeed, democratic values are shared now beyond the west, but does it mean that everywhere we're going to witness duplication of the american model of the democracy? probably not. does it mean that we them reject the whole experience? it would not be a wise move. this brings me to my second point on what does this mean for the u.s. foreign policy? we're at a time now talking about promotion of democracy's very i would say criticized or rejected, and i understand why. if you look at the popularity of u.s. in this part of the world, you see a consistent and repeated decline of positive opinions vis-a-vis the u.s..

there's been lots of resentment of previous attempts to promote democracy. i'm not going to go there, but ever since time, it doesn't mean that we have to democracy, means not promoting value, not considering that the west has to teach democracy in other parts of the world. to create a partnership, and this is possible because this has been done by u.s. administrations. particularly, in the eastern european context. you can see how successful democracyization policy worked in the european context by two elements that maybe we can learn from and invest. it was establishing a good

community cation with the target in a functioning market place of ideas. i think this is missing in the way we are dealing with muslim senses. since the arab spring, we're aware that communication matters. actually, we are are, i would say too much aware because now the social media is a policy to solve everything, and the social media, a lot of investment in the current administration to communicate through the channel with different segments of civil society in the muslim world, but what do we communicate or pay attention to, and i would say here that when we say democracy again, it may not mean the same thing for someone living -- when

we hear it, it doesn't mean what we're afraid of here which is, you know, the imposition of a cause of law, and, again, we don't -- we don't make enough to clarify this kind of, you know, heavy loaded terms in any communication with this part of the world. i remember it was the new regime in libya to go, and the first declaration was impose sharia in the drink, and, you know, this was considered very, very worrying from the we were eye. what is sharia mean there? maybe it mean, and i can explain this a little more in detail, but it may be simply principles,

like, you know, the temperature commandments. in the u.s., some politician refers to the ten commandments, it's not seen as, you know, a back ward move towards the religious state. maybe sharia is used this way. in this particular context, tunisia is a good example of the move from reference to principles to, from inposition of the law, and this is important to us, and just not take it face value. there is a lot of relationship in power in the use of the world. i know it sounds not too realistic in relations, but it matters. we have not paid attention enough to the communication with this part of the world, and so incidents are picking up, you

know from decorum, segregation, to -- i would not consider the movie as, you know, something that was passed on u.s. foreign policy, but we have to deal with it, okay? apology is good, but this is, i tell you, very reactive approach. we need to be much more proactive in the way we community kate so what does this mean? if we want to target audiences or actors that can promote a vision of democracy that include not just free and fair elections, but other amendments like a plush rise tick approach to society. we have to change, also, the way we interact as a principled set of institutions with this country.

we have given too much priority to the leaders, and it's true that in the current administration also there is a force to diversify and accused of being -- it turns into a complex approach. with one hand of the add -- administration doing one thing with ngos and another thing do something else with the state. sometimes these two elements do not add up or do not turn into energy, and it's, i think it's in some way very heart breaking for the american point of view because we put a lot of money through all the factions in this particular part of the world. what comes back is from the society is we are doing nothing. again, how do we make it work in a way that's more transparent,

that's more coordinated, and this goes with wishes of the population. you know, they toppled it and wanted transparency in resources, and calls thinking of another way instead of doing one thing here and another thing here, create platforms and make the different way, and ways they meet each other. for example, it did happen in american policy. when in sudan, you cannot -- i would take the objection that sudan is a time of constriction. it's a very successful example of the convergence and political

unit and the u.s. administration coming together to help rebill the country and bringing in different elements, not just state and citizen, but also civil society movement, and in this sense, there is a lot of to think of. the point would not be to add or increase the aid. it would be more about thinking of creating spaces or interfaces that make this much more efficient and that would also change the outlook of the u.s. in this part of the worldment i think that focusing only on state work is counterproductive because, again, the state is seen as bias and previous speaker explain why the bias is there, but there's a huge resources that american are not using enough which is the american society effects, and i

was very surprised -- i did a lot of focus groups of the american muslim when they live in the u.s., and coming from pakistani or iraq, the first thing they discover is the energy, vibrancy of americans, and they tend to associate between, you know, the u.s. foreign policy and american society, and most of them, all of them are very positive on that, and every time they have groups, we didn't know because we see only, you know, the foreign policy as pecks. there is something here in terms of communication, also that could be helpful. it means also militarily. i know this is not popular, but it may work, looking at what the e.u. is doing in this part of the world, a lot could be put

together, especially in libya or tunisia. the most resistant actors play on the decision, not only of their own politicians, but of the division and compartmentalized work of the west in different parts of the world. again, the idea of platforms here is something to think of, and it's been working in some cases. to finish up, i would like to say the work is use because it means thinking of how we interact or engage from the very concrete aspects of who does what in different parts of the world. one, a also mean being able to identify locally and not only through the internet. the internet is nice, but it

gives a report of what people are doing, and, again, i know the social media doesn't make revolution. education makes revolution, upper and middle class make revolution, not the social media, and, for that, we need to be more aware of indicators emerging and who is doing what now in this different -- in this different civil society, and for that, i think that the need is better understanding to be able to bring in skills, people in this part of the world, and i will finish really on that, are admiring the u.s. for its capacity for education, for its capacity for entrepreneurship. i do not -- of course, we can bring entrepreneurs from the middle east to visit the u.s. or

vice versa. it doesn't create the positive cross pollination with state institution. how do we make this work? this would be very important way to build more secure societies because as we know, what i'm lining up here is some element for a long term approach which could be prosecutorring, especially in time of election, but in the long run, there's aspects that could be used and could start using right now to change the interaction with this part of the world. thank you. >> thank you. [applause] >> thank you very much my job in the panel is probably easier than the jobs others have

because it's basically to discuss policy choices that the next person in the white house -- could be obama or the governor -- will face in terms of dealing with saudi arabia and the gulf. the way i like to any of is whatever the election of the outcome, there's a new secretary of state, i believe, and how would a professional foreign policy official brief that new secretary before he or she had their first substantive meeting with the leaders? what would be the issues that briefer puts on the table to say, hey, this is the things to discuss, the questions that should be on the agenda, and i think any good briefer goes back and says, well, what had been the previous interactions between american presidents and the saudi leadership?

you would start, really, with the meeting between then crowned prince and george w. bush and texas in 2005 when the crown prince suggested and the president agreed, that they would form a strategic dialogue committee, and one of the reasons for wanting to have a dialogue committee headed by the foreign minister and secretary of state is prior to that, there was a lot of issues coming from all parts of the government complaining about this kind of saudi behavior or this, and there was no overall way to put things in context. what was the context of religious freedom, human rights, democratic values versus cooperation on peace process, oil markets, and other things, and one of the things that the strategic dialogue did was put everything on a table for once every six month review for the

top leadership, and back in 2005, the main issues that were on the agenda were counterterrorism, how do you go against terrorists themselves? terrorist finance, how do you clamp down on loose money going to terrorist groups? the issue of visas for saudis. saudi arabia's desire to finally join the world trade organization, peace process and oil expanding capacity. that was in 2005. i think you can say looking back pretty much took the box on counterterrorism. you got a well-admired counterterror operations in saudi arabia. they vote on the educating the

public and tracking down people, identifying them, tracking them down, prosecutorring them, and then often trying to rehabilitate them. i don't know of an american official who thinks they are severely lacking in that. there's a great deal in praise in how far they've gone. it took longer for the u.s. and saudi arabia to work together on terror finance, but, a year ago, the treasury held a september review of where things stood on cooperation with saudi arabia on those two issues, and you had stuart levy and fred townsend in the previous ones. in that symposium, what i was struck was unity and basically the boxes of counterterrorism and terror finance picked off

and they continued to have tension, but those are no longer issues to put on the next secretary's agenda. they are done, take the box off. the visa issue, contentious in 2005 is pretty much done. between 2000 and 2005, you had an average of 3,000saudi students studying here in the united states, and, of course, after 9/11, there was a lot of scrutiny of the visas. people were held up, students missed a year because the visas expired, and then they'd have to go back and wait in line. now you have 60,000saudi students here. the visa problem solved, five year visas, and u.s. citizens get visas into saudi arabia. it's worked very well. i think the fact that the king ab dull la provided scholarships

for the 60,000 college students is an example of where he wants to bring the country. he wants 60 # ,000 to come back with a good view of american values. i would point out paraphernalia -- parenthetically there's a disportioned representation of s audi shia, but as people try to look and figure who is who, yeah, it's considerably, perhaps double the percentage of shia in saudi arabia are getting scholarships here. i think that's good. in 2005, the question was oil prices and what the saudis plans for expansion were.

basically, they described this program that they were then launching to expand production capacity by 2.5 million barrels day, and that's done. we still have considerably higher oil prices now than we did in 2005. they've been accelerating, but that's largely the result of growing world demand outside of the oecd, and unless there's some change in that, we're going to have continued, fairly robust pricing. the news secretary, go over what are the boxes checked successfully done, but way are the new issues that would face? obviously, one of them, an issue worth discussing because he can

take actionable action together between our country and saudi arabia is the fallout from the arab spring, particularly between egypt and yemen. i think we know that saudi arabia had mixed feelings about how quickly mubarak was dumped, and -- but they also, the saudis playeded a crucial role of easing yemen. it was not easy. it was slow. it was bloody, but compared to the other changes, it was not that bad. in april of to 20* -- 2011, just as the arab spring was in full bloom, if you will, the c7 finance ministers met in france and formed a partnership with the vision that was simple that europe had been through this kind of thing before. after eastern europe broke away